MARKETING AND DISTRIBUTION AGREEMENT

 

 

 

 

                                                                   Exhibit 10.11

 

                      MARKETING AND DISTRIBUTION AGREEMENT

 

      This MARKETING AND DISTRIBUTION AGREEMENT is made and entered into as of

the date of last signature below, by and between DANA CORPORATION, a Virginia

corporation, through its Heavy Vehicle Technology and Systems Group; and

SMARTIRE SYSTEMS INC., a Yukon corporation.

 

      WHEREAS, DANA is a leading Tier I supplier in the design and manufacture

of commercial vehicle drive train components for medium and heavy duty vehicles

for sale to original equipment manufacturers and associated original equipment

service and the independent aftermarket;

 

      WHEREAS, SMARTIRE is a Tier I and Tier II supplier engaged in the design

and manufacture of wireless sensing systems and associated components for medium

and heavy duty vehicles;

 

      WHEREAS, the Parties desire to enter into an agreement pursuant to which

DANA would market, sell, and distribute SMARTIRE products for use in VEHICLES,

both independently and through ROAD RANGER (defined below); and

 

      WHEREAS, SMARTIRE's tire monitoring system is based on a "wireless

gateway" concept that may be compatible with other sensing opportunities for

other products, and the PARTIES may wish to co-develop further products in the

future.

 

      NOW, THEREFORE, in consideration of the premises and mutual covenants

contained herein, the PARTIES hereby agree as follows:

 

1.     DEFINITIONS

 

      "AGREEMENT" means this Marketing and Distribution Agreement.

 

      "COMPONENTS" means components supplied by SMARTIRE as part of a SYSTEM,

whether now existing or developed during the term of this AGREEMENT. References

to COMPONENTS include, where appropriate, the entire SYSTEM.

 

       "CONFIDENTIAL INFORMATION" means all nonpublic information disclosed by

either PARTY to the other, whether before or after the date of this AGREEMENT,

which relates to the design, production, marketing, distribution, or sale of

COMPONENTS.

 

      "CUSTOMERS" means OEMs, fleets and INDEPENDENT DISTRIBUTORS.

 

      "DANA" means the Heavy Vehicle Technology and Systems Group of Dana

Corporation, a Virginia corporation.

 

      "DISCOVERIES" means all ideas, concepts, creations, developments,

enhancements, modifications, know-how, techniques, business methods, other

methods, procedures, processes, notes, drawings, compositions, computer

programs, product formulations, source codes, layout designs, works of

authorship, copyrights (whether registered or unregistered), improvements,

processes, apparatuses, formulations, inventions and discoveries and physical

embodiments thereof, whether patentable or not, with respect to COMPONENTS or

SYSTEMS.

 

 

SMARTIRE/DANA CONFIDENTIAL                                         September 2005

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      "INDEPENDENT DISTRIBUTOR" means aftermarket distributors not under the

direct or indirect control of an OEM.

 

      "LOSS" is defined in Section 9.5

 

      "NOTICE" means formal notice in accordance with Section 13.

 

      "OEM" means an original equipment manufacturer, which manufactures POWER

UNITS and/or TRAILERS, including its dealers and distributors.

 

      "PARTY" means DANA or SMARTIRE. "PARTIES" means both DANA and SMARTIRE.

 

      "PERSON" means any individual or entity.

 

      "POWER UNIT" means a Class 4 through Class 8 truck, bus, motorhome, or

tractor (excluding agricultural tractors).

 

      "ROAD RANGER" means DANA's Road Ranger marketing alliance with Eaton

Corporation.

 

       "SMARTIRE" means SmarTire Systems Inc., a Yukon corporation.

 

      "SYSTEM" means any wireless sensor system developed by SMARTIRE, using a

wireless gateway, sensors, and other COMPONENTS for tire pressure monitoring and

other remote sensor tasks, whether now existing or developed during the term of

this AGREEMENT.

 

      "TERRITORY" means the United States of America, Canada, Mexico, Australia,

and New Zealand.

 

      "TRAILER" means a highway trailer, dolly and chassis designed for use with

a POWER UNIT.

 

      "VEHICLE" means a POWER UNIT or TRAILER.

 

2.     SCOPE OF RELATIONSHIP

 

2.1.   SMARTIRE hereby grants to DANA, directly or through ROAD RANGER, the

      non-exclusive right to market, sell, and distribute COMPONENTS to

      CUSTOMERS in the TERRITORY for use in POWER UNITS and TRAILERS.

 

2.2.   As of the date of this AGREEMENT, SMARTIRE represents and DANA

      acknowledges SMARTIRE's representation that that SMARTIRE has previously

      entered into agreements with third parties related to the marketing, sale

      and distribution of COMPONENTS within the TERRITORY, which agreements may

      be extended from time to time, which SMARTIRE may only generally describe,

      as set for in Exhibit A, pursuant to SMARTIRE's confidentiality

      obligations. Provided that DANA shall be in compliance with this AGREEMENT

      in all material respects specifically using reasonable commercial efforts

      to meet the mutually agreed sales targets as set forth elsewhere herein,

 

 

SMARTIRE/DANA CONFIDENTIAL                                         September 2005

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      during the term of this AGREEMENT, SMARTIRE will not: (i) except as

      permitted in current agreements described in Exhibit A, the term of which

      may be extended, sell directly any COMPONENTS to any new CUSTOMERS in the

      TERRITORY; or (ii) grant rights related to the marketing, sale and

      distribution of COMPONENTS in the TERRITORY to any other third party.

      SMARTIRE may request a waiver of DANA's right to market and sell to a

      particular OEM in the TERRITORY by giving DANA NOTICE. If DANA does not

      affirm by NOTICE to SMARTIRE, within ten business (10) days after receipt

      of such NOTICE, DANA's intention to market and sell to such OEM, then DANA

      will be deemed to have waived its right to market and sell to such OEM.

 

2.3.   Notwithstanding Section 2.1, SMARTIRE may continue to provide COMPONENTS

      directly to CUSTOMERS in the TERRITORY under existing part numbers,

      purchase orders and contracts. Subject to mutual agreement between Dana

      and SmarTire, the parties may agree to transfer these contracts to Dana

      providing that the customer is in agreement with this transfer, and that

      mutual pricing terms between Dana and SmarTire can be established. These

      agreements shall not be transferred to a third party.

 

2.4.   SMARTIRE hereby grants to DANA the nonexclusive right to market, sell, and

      distribute COMPONENTS to CUSTOMERS outside the TERRITORY, or for use other

      than in POWER UNITS and TRAILERS; provided that DANA shall give NOTICE to

      SMARTIRE of its intention and if SMARTIRE does not advise DANA of its

      rejection of the request within ten business (10) days after receipt of

      such NOTICE, DANA may exercise its rights to the extent of the NOTICE and

      of this AGREEMENT.

 

2.5.   SMARTIRE shall negotiate in good faith with DANA prior to granting to any

      other PERSON nonexclusive or exclusive rights to market, sell, or

      distribute COMPONENTS to CUSTOMERS outside the TERRITORY, or for use in

      vehicles other than POWER UNITS and TRAILERS.

 

2.6.   At the request of either PARTY, SMARTIRE and DANA shall negotiate in good

      faith regarding the expansion of the TERRITORY and/or of the markets

      within the TERRITORY.

 

2.7.   Throughout the term of this AGREEMENT, DANA shall not market, sell, or

      distribute any system for wireless tire pressure monitoring other than the

      SYSTEMS. This covenant shall not affect in any way DANA's tire pressure

      control business.

 

2.8.   Throughout the term of this AGREEMENT, SMARTIRE shall not design, develop,

      manufacture, or sell, any tire pressure control system.

 

2.9.   The PARTIES acknowledge and agree that money damages may be inadequate to

      compensate a PARTY for any breach of Section 2.7 or 2.8. Therefore, in the

      event of any actual or threatened breach of Section 2.7 or 2.8, in

      addition to any other remedies that may be available at law or in equity,

      the aggrieved PARTY shall be entitled to appropriate temporary and/or

      permanent injunctive relief.

 

 

SMARTIRE/DANA CONFIDENTIAL                                         September 2005

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3.        SMARTIRE'S AND DANA'S OBLIGATIONS

 

3.1.      SMARTIRE shall design, develop, manufacture and sell to DANA, and DANA

         shall purchase from SMARTIRE, one hundred percent (100%) of DANA's

         requirements for COMPONENTS for CUSTOMERS in the TERRITORY during the

         term of this AGREEMENT. The COMPONENTS shall be supplied by SMARTIRE to

         DANA in compliance with all specifications as agreed between the

         PARTIES.

 

3.2.      SMARTIRE shall make reasonable commercial efforts, on a timely basis,

         to assure that all COMPONENTS are competitive with similar products,

         and to assure its suppliers are competitive, taking into consideration

         all relevant factors including, but not limited to, design, technology,

         performance, features, quality, reliability, service, delivery, and

         cost.

 

3.3.      SMARTIRE shall use reasonable commercial efforts to assure that it has

         (or its suppliers have) adequate production capacities to meet the

         estimated annual requirements provided by DANA. Any estimates are for

         planning purposes only, and are not obligations to purchase COMPONENTS.

 

3.4.      SMARTIRE shall provide technical and application support to DANA and

          the CUSTOMERS as agreed between SMARTIRE and DANA from time to time.

         Such support shall be at SMARTIRE's or CUSTOMER's expense as agreed.

         SMARTIRE shall keep DANA informed of any environmental or vehicle

         installation issues that may affect performance of the SYSTEM or

         COMPONENTS of which SMARTIRE is, or should, through the exercise of

         reasonable diligence, becomes aware.

 

3.5.      SMARTIRE shall provide reasonable amounts of training to DANA's sales

         and service technicians and to CUSTOMERS as agreed between SMARTIRE and

         DANA from time to time..

 

3.6.      SMARTIRE shall provide prototypes and reasonable quantities of

         production samples of COMPONENTS to DANA free of charge as agreed on a

         case by case basis to facilitate DANA's sale of the COMPONENTS.

 

3.7.      DANA shall use reasonable commercial efforts to actively market and

         sell COMPONENTS to CUSTOMERS and INDEPENDENT DISTRIBUTORS in the

         TERRITORY, and obtain the highest practical market penetration

         throughout the TERRITORY.

 

3.8.      The PARTIES will consult each other regularly, at least twice annually

         or as mutually agreed, to review market developments, discuss proposed

         amendments to this AGREEMENT, and to address new opportunities outside

         the TERRITORY, CUSTOMER needs, competing products, production planning,

         COMPONENT developments, COMPONENTS and SYSTEMS developments, COMPONENTS

         and SYSTEMS costs, product performance, warranty, competitiveness,

         sales targets, promotions, advertising campaigns, sales and service

         actions. One of these meetings will be held annually in September.

 

 

SMARTIRE/DANA CONFIDENTIAL                                          September 2005

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3.9.   DANA and SMARTIRE shall mutually agree on monthly, quarterly and/or annual

      sales targets to be achieved by DANA. At any time, if DANA fails to meet

      the mutually agreed sales targets, the parties shall meet to discuss the

      reasons for such failure and mutually develop a corrective action plan

      which shall provide for no less than two (2) quarters for DANA to achieve

      the sales targets. During such a period, SmarTire shall be able to provide

      increased sales support to the Customers to assist in the attainment of

      the targets, and Dana shall provide SmarTire with any relevant customer

      information required to assist in this process. Provided DANA shall be

      meeting its obligations set forth in Section 3.7, the failure of DANA to

      achieve such sales targets will not, by itself, be considered grounds for

      termination of this AGREEMENT. DANA shall provide SMARTIRE with timely

       sales reports listing all current sales prospects and opportunities for

      the COMPONENTS and participate in conference calls with SMARTIRE to

      discuss goals and plans to achieve the highest sales reasonably possible.

      DANA shall, at SMARTIRE's reasonable request, provide any information

      relating to the actual sale of COMPONENTS including e-mails, status

      reports, sales plans, proposals, or related items

 

3.10. If DANA fails to meet it sales targets despite having participated in a

      corrective action plan and having met its obligations set forth in Section

      3.7, following the second year of the AGREEMENT, DANA may, on sixty (60)

      days prior written notice in advance of any annual AGREEMENT anniversary

      date, advise SMARTIRE of DANA's intention to terminate the AGREEMENT

      without cause.

 

3.11. SMARTIRE will own, develop and provide technical and training materials

      and, at CUSTOMERS' or INDEPENDENT DISTRIBUTORS' expense, provide marketing

      and technical counsel to CUSTOMERS and INDEPENDENT DISTRIBUTORS to assist

      with the application and installation of retrofit SYSTEMS.

 

3.12. DANA will own, develop and provide reasonable and customary amounts of

      marketing and sales materials for the SYSTEMS and COMPONENTS. At

      SMARTIRE's option, SMARTIRE may develop or fund additional marketing and

      sales materials.

 

3.13. In order to assure mutual success, SMARTIRE shall furnish to DANA any

      relevant technical and commercial information regarding COMPONENTS and

      SYSTEMS, including market leads and competitive market knowledge, which

      might come into SMARTIRE's possession, except through agreements or

      relationships described in Exhibit A.

 

3.14. Each Party shall, in connection with its performance hereunder, comply

      with all applicable, rules, and regulations.

 

4.     BRANDING AND TRADEMARKS

 

4.1.   DANA has the right to market, sell, and distribute COMPONENTS under a

      brand owned by DANA; provided, however, that COMPONENT packaging will

      identify SMARTIRE as the manufacturer of the COMPONENTS.

 

 

SMARTIRE/DANA CONFIDENTIAL                                         September 2005

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4.2.   Subject to the provisions of this AGREEMENT, DANA grants to SMARTIRE for

      the term of this AGREEMENT a non-exclusive license to use the trade names,

      trademarks, logo marks and other similar markings of DANA as provided by

      DANA from time to time or other marks that DANA may identify from time to

      time in writing to SMARTIRE ("DANA MARKS") on COMPONENTS and packaging for

      COMPONENTS that it sells to DANA so long as COMPONENTS are manufactured

      and distributed in accordance with the standards, specifications and

      instructions established and approved by DANA. SMARTIRE may not use the

      DANA MARKS on COMPONENTS or packaging for COMPONENTS sold to third parties

      outside of this AGREEMENT.

 

4.3.   Upon expiration or termination of this AGREEMENT, SMARTIRE agrees to

      discontinue the use of the DANA MARKS or any mark confusingly similar

      thereto immediately, not to attempt to register or to use any trademark,

      service mark, trade name, logo, trade dress, or other similar marking that

      in the opinion of DANA is confusingly similar to any DANA MARKS. SMARTIRE

      agrees that it will destroy all materials bearing the DANA MARKS or remove

      the DANA MARKS from web sites and other electronic media.

 

4.4.   DANA shall have the right, at reasonable times and upon reasonable prior

      notice, to (a) inspect samples of SMARTIRE's finished COMPONENTS,

      packaging, labels or advertising bearing the DANA MARKS at a mutually

      agreeable location, or (b) receive, at SMARTIRE's expense, reasonable

      quantities of samples of SMARTIRE's finished COMPONENTS, packaging, labels

      or advertising bearing the DANA MARKS for the purpose of determining that

      they are of the proper quality. SMARTIRE shall change all COMPONENTS,

      packaging, labels or advertising bearing the DANA MARKS that are not

      approved by DANA.

 

4.5.   Subject to the provisions of this AGREEMENT, SMARTIRE grants to DANA for

      the term of this AGREEMENT a non-exclusive license to use the trade names,

       trademarks, logo marks and other similar markings of SMARTIRE as provided

      by SMARTIRE or other marks that SMARTIRE may identify from time to time in

      writing to DANA ("SMARTIRE MARKS") on printed material, including but not

      limited to technical materials, brochures, catalogs, instruction manuals,

      advertising, and marketing materials related to COMPONENTS and SYSTEMS.

 

4.6.   Upon expiration or termination of this AGREEMENT, DANA agrees to

      discontinue the use of the SMARTIRE MARKS or any mark confusingly similar

      thereto immediately, not to attempt to register or to use any trademark,

      service mark, trade name, logo, trade dress, or other similar marking that

      in the opinion of SMARTIRE is confusingly similar to any SMARTIRE MARKS.

      DANA agrees that it will destroy all materials bearing the SMARTIRE MARKS

      or remove the SMARTIRE MARKS from web sites and other electronic media,

      except that DANA may use printed materials until COMPONENTS in inventory

       are sold or returned for credit.

 

 

SMARTIRE/DANA CONFIDENTIAL                                         September 2005

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4.7.   SMARTIRE shall have the right, at reasonable times and upon reasonable

      prior notice, to (a) inspect samples of DANA's packaging, labels or

      advertising bearing the SMARTIRE MARKS at a mutually agreeable location,

      or (b) receive, at DANA's expense, reasonable quantities of samples of

      DANA's packaging, labels or advertising bearing the SMARTIRE MARKS for the

      purpose of determining that they meet quality standards and proper use of

      SMARTIRE MARKS previously defined by SMARTIRE. DANA shall change all

      packaging, labels or advertising bearing the SMARTIRE MARKS in a manner

      not previously approved by SMARTIRE.

 

5.     PURCHASE ORDERS AND FORECASTS

 

5.1.   DANA shall issue biweekly shipping releases by direct computer order

      entry, specifying the quantities of COMPONENTS, delivery date and delivery

      location. Each such release will indicate an twelve (12) week rolling

      estimate of weekly volumes, the last ten (10) weeks of which are forecasts

      for planning purposes and the first two (2) weeks' volume requirements

      shall be a firm commitment. The firm orders submitted by DANA shall be

      effective after confirmation by SMARTIRE. SMARTIRE will use its best

      efforts to provide such confirmation within one (1) business day after

      receipt of the order. On specific long lead components (greater than six

      months lead time), DANA will develop a one year forecast. SMARTIRE shall

      provide a list of long lead components for DANA's acknowledgement.

      Requests for additions or changes to this list shall be submitted to DANA

      for approval in writing and include an estimate of the associated costs

      and lead times by component.

 

5.2.   At any time, DANA may place an emergency order for COMPONENTS with

      SMARTIRE. SMARTIRE shall make reasonable efforts to accept such orders and

      notify DANA within one (1) business day after receipt of the emergency

      order if it accepts the order. Any incremental costs required to fulfill

      such emergency order shall be borne by DANA unless the need for the

       emergency order is created by SMARTIRE.

 

5.3.   In addition to the foregoing, DANA shall, twice annually in the first

      (1st) and third (3rd) quarter of each year give SMARTIRE a good faith

      estimate of its COMPONENT purchases during the next applicable year. These

      estimates are for planning purposes only, and are not obligations to

      purchase COMPONENTS.

 

5.4.   If any COMPONENTS are delivered in excess of volumes ordered or in advance

      of schedule, DANA may return them at SMARTIRE's expense or retain them and

      invoice SMARTIRE for any resulting handling and storage costs. DANA will

      not process invoices for COMPONENTS shipped in advance of schedule until

      the scheduled delivery date. DANA may change scheduled deliveries at any

      time by written notice to SMARTIRE and will reimburse SMARTIRE for

      reasonable, documented, unavoidable incremental costs incurred by SMARTIRE

      due to such changes. If SMARTIRE fails to deliver any shipment of

      COMPONENTS in accordance with DANA's instructions, DANA may, at its

      option, cancel the shipment, accept partial or delayed delivery.

 

 

SMARTIRE/DANA CONFIDENTIAL                                         September 2005

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6.     PRICES AND PAYMENT CONDITIONS

 

6.1.   SMARTIRE shall give DANA NOTICE of its price for each COMPONENT at the

      time of execution of this AGREEMENT or, for new COMPONENTS, as soon as the

      price is determined. SMARTIRE may change these prices upon ninety (90)

      days NOTICE to DANA; provided, however, that SMARTIRE shall honor the old

      price with respect to any binding commitments DANA has made to a CUSTOMER

      prior to receiving NOTICE of the price change. All prices shall be stated

      in United States dollars.

 

6.2.   SMARTIRE warrants that its prices to DANA for the COMPONENTS are and will

      remain no less favorable than its prices to other customers for the same

      or comparable goods in comparable quantities and in comparable terms of

      sale.

 

6.3.   DANA shall mark up SMARTIRE prices (excluding any shipping, duties,

      handling, packaging or dunnage charges) by an amount solely determined by

      DANA for resale to CUSTOMERS.

 

6.4.   Where specific opportunities or pricing issues arise with existing or

      potential CUSTOMERS, the PARTIES shall negotiate, on a case by case basis,

      in good faith a suitable pricing structure between DANA and SMARTIRE to

      meet the CUSTOMERS' request.

 

6.5.   SMARTIRE shall invoice DANA in United States dollars on a regular basis

      upon delivery of COMPONENTS. Payment terms from DANA are net on the

      sixty-second (62nd) day following the date of invoice. All PRODUCTS shall

      be sold Delivery Duty Paid to the delivery point, which may be a CUSTOMER

      location or DANA facility. As such, SMARTIRE is liable for paying all

      costs of transport, insurance, duties and brokerage fees to the delivery

      point. Title and risk of loss shall pass at the delivery point.

 

6.6.   Without limiting any other remedies available to DANA, DANA has the right

      to offset, against amounts due to SMARTIRE, any amounts due and payable

      from SMARTIRE to DANA under this AGREEMENT.

 

6.7.   All other terms and conditions of the sale of COMPONENTS to DANA shall be

      in accordance with the terms and conditions of DANA'S purchase order as

      set forth in Exhibit C. To the extent that the terms and conditions of

      such order are inconsistent with or contradictory to the express terms of

      this AGREEMENT, the terms of this AGREEMENT shall govern without

      modification by the provisions contained in such order or sales terms.

 

7.     CONFIDENTIALITY

 

The following terms govern the confidentiality of information disclosed by

either PARTY ("DISCLOSING PARTY") to the other PARTY ("RECEIVING PARTY"):

 

7.1.   RECEIVING PARTY shall restrict access to and disclosure of the

      CONFIDENTIAL INFORMATION to its affiliates and suppliers and their

      respective directors, officers, employees, and agents who have a need to

      know the CONFIDENTIAL INFORMATION. RECEIVING PARTY shall not disclose

      CONFIDENTIAL INFORMATION, directly or indirectly, to any other PERSON.

 

 

SMARTIRE/DANA CONFIDENTIAL                                          September 2005

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      RECEIVING PARTY shall not use CONFIDENTIAL INFORMATION to reproduce,

      redesign, reverse engineer, or manufacture products or equipment of

      DISCLOSING PARTY, to perform services relating to the products or

      equipment of DISCLOSING PARTY, or for its own benefit, except as expressly

      provided in this AGREEMENT.

 

7.2.   RECEIVING PARTY may only use DISCLOSING PARTY's CONFIDENTIAL INFORMATION

      in accordance with the purpose of this AGREEMENT. No other rights or

      licenses are granted to either PARTY in the CONFIDENTIAL INFORMATION.

 

7.3.   RECEIVING PARTY shall use at least the same high degree of care, but no

      less than a reasonable degree of care, to avoid inadvertent disclosure or

      unpermitted use of DISCLOSING PARTY's CONFIDENTIAL INFORMATION which it

      employs with respect to its own proprietary or CONFIDENTIAL INFORMATION

      and that it does not wish to have disseminated, published or disclosed.

 

7.4.   There shall be no restrictions under this AGREEMENT with respect to any

      portion of the CONFIDENTIAL INFORMATION, which RECEIVING PARTY can

      establish through documentary evidence:

 

      a.     was known to RECEIVING PARTY at the time of its disclosure to

            RECEIVING PARTY;

 

      b.     was or becomes publicly known through no fault, wrongful act or

            omission of RECEIVING PARTY;

 

      c.     was received by RECEIVING PARTY from a third party, without

             solicitation, such third party having a bona fide right to do so,

            and not having any confidential relationship or obligation to

            DISCLOSING PARTY, and without breach of the restrictions contained

            in this AGREEMENT;

 

      d.     was independently developed by RECEIVING PARTY without access to

            DISCLOSING PARTY's CONFIDENTIAL INFORMATION or a breach of this

            AGREEMENT;

 

      e.     was approved for release in writing by DISCLOSING PARTY; or

 

       f.     was required by law, court order or governmental agency to be

            disclosed. In such cases, RECEIVING PARTY shall immediately notify

            DISCLOSING PARTY that production or disclosure has been ordered, and

            to take all reasonable steps and cooperate with DISCLOSING PARTY to

            limit disclosure of the CONFIDENTIAL INFORMATION.

 

7.5.   CONFIDENTIAL INFORMATION shall not be deemed to be in the public domain

      merely because any part of such CONFIDENTIAL INFORMATION is embodied in

      general disclosures or because individual features, components or

      combinations thereof are now or become known to the public. All

      CONFIDENTIAL INFORMATION delivered by DISCLOSING PARTY to RECEIVING PARTY

      pursuant to this AGREEMENT shall be and remain the property of DISCLOSING

      PARTY unless otherwise provided herein.

 

 

SMARTIRE/DANA CONFIDENTIAL                                         September 2005

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7.6.   The PARTIES do not seek the confidential information or trade secrets of

      any third party, and the PARTIES shall not use in the performance of this

      AGREEMENT or disclose to the other PARTY such confidential information or

      trade secrets.

 

7.7.   In any judicial proceeding, it will be presumed that matters which are

      designated as Confidential or Proprietary constitute CONFIDENTIAL

      INFORMATION, and that RECEIVING PARTY will bear the burden of proving such

      matters or information are unrestricted pursuant to Section 7.4.

 

7.8.   RECEIVING PARTY is liable for any breach of this Section 7 by all PERSONS

      to whom it has disclosed CONFIDENTIAL INFORMATION.

 

7.9.   Upon the expiration or termination of this AGREEMENT, each PARTY shall

       return or destroy and certify the destruction of the other PARTY's

      CONFIDENTIAL INFORMATION within thirty (30) days of such request. Counsel

      for each PARTY is entitled to keep one copy in a confidential file as

      evidence of the disclosure.

 

8.     QUALITY ASSURANCE, PRODUCT APPLICATIONS and PACKAGING

 

8.1.   SMARTIRE or its suppliers shall manufacture or assemble COMPONENTS

      according to its normal quality assurance procedures and TSI6949 standards

      so as to ensure COMPONENTS' conformity with the applicable engineering

      drawings and specifications. SMARTIRE shall submit to DANA a written

      summary of its quality assurance plan and, prior to initiating the supply

      of COMPONENTS to DANA, shall furnish inspection data to show adherence to

      such plan.

 

8.2.   Prior to making any subsequent modifications to its manufacturing process

      or quality system, SMARTIRE shall furnish to DANA a written summary of its

      revised quality assurance plan, together with the applicable inspection

      data.

 

8.3.   Any changes to COMPONENTS or their specifications are subject to the prior

      written agreement of the PARTIES and, if required, the CUSTOMER.

 

8.4.   At DANA'S request, SMARTIRE shall provide ongoing evidence of conformance

      to SMARTIRE'S quality assurance plan and TSI6949 standards in the form of

      a certification from SMARTIRE'S quality department. SMARTIRE shall also

      permit DANA or its designee at reasonable times and on reasonable notice

      to audit SMARTIRE'S quality assurance procedure and review pertinent

      inspection records at the manufacturing and assembly locations of SMARTIRE

      and its suppliers. The PARTIES agree to work toward the objective of

      SMARTIRE becoming a qualified supplier pursuant to DANA'S supplier quality

      requirements.

 

 

SMARTIRE/DANA CONFIDENTIAL                                         September 2005

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8.5.   SMARTIRE shall develop approval guidelines for acceptable applications and

      installations of COMPONENTS with regard to wheel installation and signal

      integrity within 60 days after validation of any COMPONENTS and may revise

      the same from time to time to reflect COMPONENT modifications, COMPONENT

      packaging modification or additional COMPONENT configurations, upon

      agreement by the PARTIES.

 

8.6.   DANA shall approve COMPONENT applications and installations which are

      within the limits of the guidelines referred to in Section 8.5. In those

      cases where an application or installation does not conform to the

      standard conditions, DANA shall request SMARTIRE'S assistance and SMARTIRE

      will respond to such request by approving or disapproving the proposed

      application within ten (10) days.

 

8.7.   The engineering departments of SMARTIRE and DANA shall maintain

      information on approved applications and installations of COMPONENTS. DANA

      shall be responsible for the communications of CUSTOMER and applications

      and installation approval or disapproval to its CUSTOMERS. DANA shall

      promptly notify SMARTIRE regarding such communications.

 

8.8.   The PARTIES will mutually agree upon COMPONENT packaging prior to initial

      deliveries.

 

9.     WARRANTY & LIABILITY

 

9.1.   SMARTIRE shall provide DANA with SMARTIRE's express warranty with respect

      to the SYSTEMS and COMPONENTS, a copy of which is attached as Exhibit B

      and made an integral part hereof. DANA shall pass the aforesaid SMARTIRE

       warranty on to its CUSTOMERS, and SMARTIRE shall fully honor this

      warranty. SMARTIRE shall have no obligation to honor any warranty

      obligations--with respect to the SYSTEMS and COMPONENTS--which are in

      addition to those obligations set forth on Exhibit B, except to the extent

      that DANA and SMARTIRE shall previously have agreed otherwise..

 

9.2.   Decisions on warranty claims made against DANA for COMPONENTS shall be

      made by DANA in its reasonable discretion. DANA shall use reasonable

      commercial efforts to justify all such warranty claims. If SMARTIRE

      disagrees with DANA'S decisions on these warranty claims, the PARTIES

      shall negotiate an agreeable settlement within a reasonable period. DANA

      shall provide SMARTIRE with adequate written